SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0119-19T3

IN THE MATTER OF 

PROCEEDINGS BY THE

COMMISSIONER OF 

BANKING AND INSURANCE,

TO FINE, SUSPEND, AND/OR

REVOKE THE INSURANCE

PRODUCER LICENSE OF

HANY SHEHATA D/B/A

MHM INSURANCE AGENCY

REFERENCE NO. 9939802.

__________________________

Submitted November 9, 2020 – Decided 

Before Judges Hoffman and Suter.

On appeal from the New Jersey Department of Banking 

and Insurance.

Miller, Meyerson & Corbo, attorneys for appellant 

Hany Shehata (Gerald D. Miller and Nirmalan 

Nagulendran, on the briefs). 

Gurbir S. Grewal, Attorney General, attorney for 

respondent Department of Banking and Insurance 

(Melissa H. Raksa, Assistant Attorney General, of 

counsel; Nicholas Kant, Deputy Attorney General, on 

the brief).

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the 

internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

December 21, 2020
2

A-0119-19T3

PER CURIAM

Appellant Hany Shehata appeals the August 25, 2019 final order of the 

Commissioner of the Department of Banking and Insurance (Commissioner) that 

revoked his insurance producer license and imposed an aggregate civil penalty

of $25,000 plus costs. In his initial brief, appellant challenges — as excessive

— the amount of the civil penalties imposed by the Commissioner. In his reply 

brief, appellant also challenges the revocation. We affirm the Commissioner's 

final decision revoking appellant's insurance producer license. We vacate the

civil penalties and remand that issue to the Commissioner for further 

proceedings consistent with this opinion. We do not retain jurisdiction.

I

In 2014, appellant was licensed as an insurance producer under the 

Insurance Producer Act (the Act), N.J.S.A. 17:22A-26 to -48, and operated 

under the trade name MHM Insurance Agency. L.C.1 purchased a home 

improvement insurance policy through appellant. The policy was issued by 

Tapco Underwriters. Tapco cancelled the policy on March 15, 2014, refunding 

$809.37 in premium to appellant for L.C. Appellant placed the premium in his

1 We use the abbreviation as it appeared in the final order.
3

A-0119-19T3

personal bank account, rather than in a trust account as required by N.J.A.C. 

11:17C-2.3. He did not advise L.C. about the cancellation or the refund. 

L.C. filed a complaint with the Department of Banking and Insurance 

(DOBI) when L.C. became aware of the cancellation and refund. A DOBI 

investigator contacted appellant on March 25, 2015, advised him about the 

complaint and asked for an explanation. On April 5, 2015, appellant paid L.C. 

$809, issuing this check from his personal bank account. 

The DOBI issued administrative order to show cause E18-52 on May 25, 

2018. In it, DOBI alleged appellant failed to advise L.C. about the cancellation 

of the insurance policy (count one), N.J.S.A. 17:22A-40(a)(8); failed to refund 

premium within five days (count two), N.J.S.A. 17:22A-40(a)(2), (4), (8) and 

N.J.A.C. 11:17C-2.2; and failed to maintain a trust account (count three), 

N.J.A.C. 11:17C-2.3. Appellant's attorney corresponded with DOBI's attorney 

on February 21, 2019. In his letter, the attorney represented that appellant 

"mistakenly deposited the client's check to his account. It was not until 

receiving the March 25, 2015 letter from the investigator that he learned about 

the mistaken deposit and within [ten] days of that date [appellant] issued the 

refund check." Counsel exchanged further emails. The DOBI twice extended 
4

A-0119-19T3

the deadline for appellant to file a response to the administrative order to show 

cause and ask for a hearing, but appellant did not take any action. 

The Commissioner issued a final order on August 25, 2019. The 

Commissioner found that appellant was given notice of the charges and an 

opportunity to contest them. He failed to respond to the charges which 

constituted a waiver of his right to a hearing. Pursuant to N.J.A.C 11:17D2.1(b)(1), the Commissioner found the charges were admitted because of a lack 

of response. The Commissioner ordered revocation of appellant's producer

license and imposed civil penalties as authorized by N.J.S.A. 17:22A-45(c). 

These included $5000 for count one and $10,000 each for counts two and three. 

The order also assessed $487.50 in costs for DOBI's investigation and 

prosecution of the case as authorized by N.J.S.A. 17:22A-45(c) and N.J.A.C. 

11:1-32.4(b)(20). The order required payment in ten days. 

Appellant appeals the final order arguing the fines and penalties imposed 

against appellant are excessive and contending the Commissioner failed to 

assess the factors set forth in Kimmelman v. Henkels & McCoy, Inc., 108 

N.J.123 (1987). He argues the civil penalties imposed violate the Excessive 

Fines Clause of the United States Constitution's Eighth Amendment. 
5

A-0119-19T3

II

Our review of an administrative agency's final decision is limited. 

Kadonsky v. Lee, 452 N.J. Super. 198, 201-02 (App. Div. 2017). "We will not 

reverse an agency's judgment unless we find the decision to be 'arbitrary, 

capricious, or unreasonable, or [ ] not supported by substantial credible evidence 

in the record as a whole.'" Id. at 202 (alteration in original) (quoting In re 

Stallworth, 208 N.J. 182, 194 (2011)). We "'defer to the specialized or technical 

expertise of the agency charged with administration of a regulatory system.'" 

K.K. v. Div. of Med. Assistance & Health Servs., 453 N.J. Super. 157, 160 (App. 

Div. 2018) (quoting In re Virtua-West Jersey Hosp., 194 N.J. 413, 422 (2008)).

The business of insurance is "properly subject to comprehensive 

regulation in protecting the public welfare" because it is affected with a strong 

public interest. Sheeran v. Nationwide Mut. Ins. Co., 80 N.J. 548, 559 (1979). 

The insurance producers conducting this business are fiduciaries who are held 

to a high standard. In re Comm'r of Banking & Ins. v. Parkwood Co., 98 N.J. 

Super. 263, 268 (App. Div. 1967). "Premiums collected by the agent become a 

trust fund to be held and disbursed by the agent in a fiduciary capacity." Dep't 

of Ins. v. Universal Brokerage Corp., 303 N.J. Super. 405, 409 (App. Div. 1997) 

(citing Bohlinger v. Ward & Co., 34 N.J. Super. 583, 588 (App. Div. 1955) 
6

A-0119-19T3

(providing an agent is a fiduciary regarding the collection and refund of 

premiums)). "Close and continuous scrutiny of the licensee's exercise of his 

license and the establishment of standards and guidelines are necessary to 

maintain [a] high standard of conduct and . . . fidelity . . . ." Parkwood, 98 N.J. 

Super. at 268. The legislature has conferred this authority on the Commissioner. 

The Act authorizes the Commissioner to "place on probation, suspend, 

revoke or refuse to issue or renew an insurance producer's license. . . for any 

one or more" of nineteen enumerated "causes." N.J.S.A. 17:22A-40(a)(1) to 

(19). The Commissioner also can impose civil penalties consistent with the Act 

under N.J.S.A. 17:22A-45(c). Causes for action include:

(2) Violating any insurance laws, or violating any 

regulation, subpoena or order of the commissioner or of 

another state's insurance regulator; 

. . . .

(4) Improperly withholding, misappropriating or 

converting any monies or properties received in the 

course of doing insurance business;

. . . .

(8) Using fraudulent, coercive or dishonest practices, or 

demonstrating incompetence, untrustworthiness or 

financial irresponsibility in the conduct of insurance 

business in this State or elsewhere. . . . 

[N.J.S.A. 17:22A-40(a)(2), (4), (8).]
7

A-0119-19T3

The Commissioner is authorized to promulgate regulations to "effectuate 

the purposes of [the] [A]ct." N.J.S.A. 17:22A-48. Under applicable regulations, 

an insurance producer is required to return refunded premiums within five 

business days. N.J.A.C. 11:17C-2.2(b). As a fiduciary, a producer is required 

to maintain a trust account. N.J.A.C. 11:17C-2.3. An insurance producer is not 

to misappropriate funds or convert funds to his own use. N.J.A.C. 11:17C2.1(a). 

A producer subject to suspension or revocation receives written notice of 

the reasons and may request an administrative hearing within twenty days from 

service. N.J.A.C. 11:17D-2.1(d)(1). If the producer does not respond within 

the time allotted, the failure "shall be deemed to be an admission to all of the 

allegations, charges and conclusions contained in the notice, and no further 

proceeding shall be required prior to the execution of a final order . . . ." 

N.J.A.C. 11:17D-2.1(b)(1). 

In this case, the Commissioner found appellant was served with the 

administrative order to show cause that set forth three separate violations of the 

Act or its regulations. Appellant did not respond to the charges or request a 

hearing. His attorney submitted a short letter to the DOBI explaining that 

appellant mistakenly deposited the return premium in his own account and 
8

A-0119-19T3

refunded it a year later when the issue was called to his attention by DOBI. 

However, the attorney's letter is not evidence and there remains no certification 

from appellant responding to the underlying charges. See Pressler & Verniero, 

Current N.J. Court Rules, cmt. on R. 1:6–6 (2020) ("Affidavits by attorneys of 

facts not based on their personal knowledge but related to them by and within 

the primary knowledge of their clients constitute objectionable hearsay." 

(citations omitted)). Thus, there was no evidence before the Commissioner that 

appellant had a defense to the charges or that his conduct demonstrated 

mitigating circumstances. 

There was no dispute that L.C.'s policy was cancelled in 2014, that 

premiums were refunded to appellant and that appellant did not return the 

amount of the refunded premium until a year later. The refund was made from 

his personal account, not a trust account. Appellant did not advise L.C. that the 

policy was cancelled, or the premium refunded. This conduct violated the 

regulations. The Commissioner found the charges were admitted. 

On this record, the Commissioner's order revoking appellant's producer 

license was not arbitrary, capricious or unreasonable. The appropriate test for 

reversal of a license revocation is "whether such punishment is so 

disproportionate to the offense, in light of all the circumstances, as to be 
9

A-0119-19T3

shocking to one's sense of fairness." In re License Issued to Zahl, 186 N.J. 341, 

354 (2006) (quoting In re Polk, 90 N.J. 550, 578 (1982)). The Act and 

regulations permit license revocation for "violating any insurance laws . . . or 

regulation[s]," "[i]mproperly withholding, misappropriating or converting any 

monies," "[u]sing fraudulent, coercive or dishonest practices, or demonstrating 

incompetence, untrustworthiness or financial irresponsibility" in the course of 

the producer's business. N.J.S.A. 17:22A-40(a)(2), (4), (8). There was 

unrebutted evidence to support the charges that appellant violated the 

regulations, withheld funds improperly and was irresponsible in the conduct of 

his business. L.C. was unknowingly uninsured for a year. This conduct could 

have posed substantial risk to the insured. We cannot say that the sanction of 

revocation was an abuse of the Commissioner's discretion. 

Appellant contends the Commissioner's imposition of civil penalties was 

excessive and in violation of the law because the Commissioner did not consider 

the factors under Kimmelman. 108 N.J. at 123. He contends that the penalties 

violated the Excessive Fines Clause of the U.S. Constitution's Eighth 

Amendment. Neither argument was addressed to the Commissioner because 

appellant never responded to the charges. 
10 A-0119-19T3

The Commissioner is authorized to assess civil penalties for violation of 

the Act or regulations. 

Any person violating any provision of this act shall be 

liable to a penalty not exceeding $5000 for the first 

offense and not exceeding $10,000 for each subsequent 

offense to be recovered in a summary proceeding . . . . 

In addition, the commissioner or the court, as the case 

may be, may order restitution of moneys owed any 

person and reimbursement of the costs of investigation 

and prosecution, as appropriate.

[N.J.S.A. 17:22A-45(c).]

Administrative penalties "must be tested for reasonableness as applied to 

the specific facts involved." In re Garay, 89 N.J. 104, 115 (1982). To determine 

reasonableness, courts assess "whether [the] punishment is so disproportionate 

to the offense, in light of all the circumstances, as to be shocking to one's sense 

of fairness." Zahl, 186 N.J. at 354 (quotation omitted). Our Supreme Court has 

outlined seven factors for consideration when imposing civil penalties: (1) the 

good or bad faith of a defendant; (2) a defendant's ability to pay; (3) amount of 

profits obtained from the illegal activity; (4) injury to the public; (5) duration of 

the conspiracy; (6) existence of criminal or treble damages actions; and, (7) past 

violations. Kimmelman, 108 N.J. at 137-39. 

The Commissioner imposed the maximum civil penalty here, assessing 

$5000 for count one and $10,000 for each of the remaining two counts for a total 
11 A-0119-19T3

of $25,000. The Commissioner also assessed $487.50 for investigation costs. 

The assessment of costs is not challenged.

The Commissioner acknowledges she did not analyze the Kimmelman

factors because the administrative action was a final order following appellant's 

default. However, there is nothing in the Act that would support the imposition 

of the maximum civil penalty just because there has been a default. The law has 

long supported the notion that the assessment of civil penalties should not be 

calculated simply based on the maximum allowable. See Garay, 89 N.J. at 115 

(providing that where the maximum civil penalty was imposed, the director did 

not exercise discretion and the Court "remand[ed] to him to decide upon a 

reasonable sum."). By not analyzing the factors under Kimmelman or any other 

information, we conclude the Commissioner has not appropriately exercised 

discretion. Therefore, we vacate the civil penalties and remand that issue to the 

Commissioner for further consideration and analysis. The Commissioner should 

permit appellant and the DOBI the opportunity to submit argument on this issue. 

Appellant also contends the civil penalty raises issues of a constitutional 

dimension. That issue is moot in light of our opinion. It also was never raised 

to the Commissioner. We are not required to decide issues that were not raised. 
12 A-0119-19T3

See State v. Galicia, 210 N.J. 364, 382 (2012) (stating that "[g]enerally, an 

appellate court will not consider issues . . . which were not raised below"). 

Affirmed in part; the civil penalties are vacated and that issue is remanded 

to the Commissioner for further proceedings consistent with this opinion. We 

do not retain jurisdiction.